The price is what a buyer will pay. Professional valuers use several methods:
- a multiple of earnings, usually of profit before interest, tax, depreciation and amortisation, which is the usual method for a profitable business
- a multiple of revenue, for a fast-growing or loss-making business
- net assets, often treated as a floor
- discounted cash flow, which values the cash the business is expected to earn
- comparable sales of similar businesses
Owners often value their own business above what the market will pay, so get an independent valuation before you set your price.